Jewellers depend on informal gold supply

Jewellers in the country largely depend on informal supply chain, including smuggling, for gold to meet the domestic demand in the absence of easy legal system for its import, industry insiders and intelligence officials said. Theltugh the law allowes import of gold with permission from the Bangladesh Bank, businesses have never used the provision, central bank officials said.In such a blurred situation, gold smuggling in the country is on the rise and intelligence officials suspect that many jewellers were engaged in the smuggling. Customs Intelligence and Investigation Directorate of the National Board of Revenue alone seized some 1,101 kilograms of smuggled gold in the last three years at international airports in the country.Jewellers cannot provide legal documents of the sources of gold they sell and showcase, they said. The directorate seized 540kg gold from Apan Jewellers outlets in May 14-15 as the business house failed to furnish documents of the sources of the gold during drivers.The revenue board has also asked its four field offices to collect information about sales and payment of value-added tax by jewellers in Dhaka city for the past three years, board officials said. Jewellers and intelligence officials, however, said that Bangladesh became a transit for gold smuggling and the destination of the largest portion of smuggled gold was neighbouring India. Bangladesh Jewellers Association has been demanding for many years for easing the procedure of import of gold, reducing the rate of duty and formulating a policy for the sector to ensure legal supply of gold. The association has, however, no statistics of annual demand or sales of more than 700 members of the association. There are more than 10,000 jeweller outlets in the country. Assosciation vice-president MA Hannan Azad told New Age on Thursday that they had no records of import of gold by the association members.Gold import under baggage rules is not commercially viable for traders as the duty rate is very high while getting permission from the Bangladesh Bank for commercial import is very complex and time-consuming, he said. ‘We meet the demand mainly by the gold brought by passengers under baggage rules and recycling old ornaments sold by users,’ he said. He denied the allegation that they met the demand by smuggled gold and said that the annual sales even did not cross the quantity brought under the baggage rules. Local market is not so big to absorb the huge quantity of smuggled gold, he added. The smuggled gold is not sold in the country as Bangladesh is just being used as transit and the smuggled gold goes to other countries mainly India, he said.The baggage rules of the revenue board allowes an incoming international passenger to bring gold ornaments up to 100 grams without any tax and gold bar up to 234gm (about 20 bhori) paying duty at Tk 3,000 per bhori.Hannan said that passengers could not provide documents while selling the gold to jewellers and consequently businesses also had no legal document of the source of the gold. The business process becomes non-transparent and now the legality of the business comes under question,’ he said. Customs intelligence director general Moinul Khan said that they were taking stern measures to prevent gold smuggling. The directorate has also requested the Bangladesh Bank and the revenue board to take measures to ensure legal source of gold supply for businesses, he said. In a letter sent to the Bangladesh Bank on May 17, Moinul requested the central bank to ease permission for commercial import of gold and hold regular public auction of gold to ensure its supply on the market and prevent gold smuggling. Jewelers said that the question of the legality of the source of their business would end if the government allowed easy import or the central bank held regular auction of gold regularly. No auction was held after 2008, they said.Till now, 4,630kg seized gold was deposited in the Bangladesh Bank vault while 2,280kg was transferred to the central bank reserve and the rest remained for settlement. Central bank officials said that till now only one trader sought permission from them to import gold but he did not proceed later.Businesses have to provide a set of information, including the source of money, to the central bank and that is why traders don’t import gold in legal channel, they said.